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- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Monday is a big day for same-sex partners as well as for the financial advisors and tax consultants they work with. That’s when the IRS is set to apply the terms of a recent ruling (2013-17) to same-sex married couples.
Naturally, there’s quite a lot to read up on before then. Plus, says Baird financial planner Scott Grenier (left), there’s a “steep learning curve” when it comes to understanding all the financial planning implications of the ruling in order to best advise clients in same-sex marriages.
“It goes beyond the income-tax driving factor and the revenue ruling,” he explained in an interview. “It also entails digging into other areas of planning that haven’t been fully addressed, like employment discrimination, hospital visitations, changing residence, etc.”
When it comes to tax benefits, some are based on residency, while others are based on the legal status of same-sex marriage in each state. This situation “creates a lot of uncertainty and challenges in planning, especially for same-sex married couples considering a change in residency,” Grenier said.
Monday is a milestone, he notes, because it’s the first time many benefits become available to these couples. “As we look at Social Security benefits, healthcare premiums, estate and tax planning, it requires great attention to detail and who these benefits are available to and how the benefits might change depending on which state they live in,” the advisor said.
Federal vs. State Policy
All same-sex married couples are required to file a married federal income tax return for 2013. However, according to a recent Baird white paper, these same couples are not necessarily eligible to file joint state income tax returns.
At present, 29 states have a constitutional ban on same-sex marriage; six limit marriage to “one man and one woman,” and two do not yet have a policy on same-sex marriage. This means same-sex couples in 37 states will have to keep filing single returns at the state level, while also filing a joint federal return.
Moreover, the majority of those states, 24 this year and 25 in 2014, reference the federal income tax return when calculating the state income tax.
This means broker-dealers, like Baird, need to focus on all 50 states where they have advisors and clients and to become familiar with the relevant tax policies in order to work with same-sex married couples and their future residency plans, according to Grenier.
One of the most pressing matters for advisors and clients to discuss is health insurance, he points out.
The statute of limitations says that same-sex married couples can amend their tax returns for 2010 through 2012, as well as 2009, if they filed an extension.
Perhaps the most pressing issue is what to do about 2012 returns that aren’t yet filed. Same-sex married couples only have until Monday to decide if they will file as individual taxpayers or as a married couple. After Sept. 16, they must fill out their forms as a couple.
When it comes to potential refunds and filing decisions, “The ultimate determination has to be done by running the figures, and that’s done by a tax advisor,” Grenier said.
For advisors who want to grow their business in this client area, the College for Financial Planning offers the Accredited Domestic Partnership Advisor (ADPA) designation, which about 300 individuals have received.
Baird is working to encourage its more than 700 employee reps to pursue this designation. It formed the Spectrum Associate Resource Group in 2012 to provide support, resources and opportunities for lesbian, gay, bisexual, transgender and other associates and wants to help many of its reps attract and retain associates and clients in the LGBT community.
Check out Post-DOMA’s Demise, Prepping Your Practice to Meet the Needs of Same-Sex Couples on ThinkAdvisor.